Remarks by Senator Joe
Lieberman to the Economic Club of DetroitMay 20, 2002Prepared Remarks

Overview

Thanks for having me here today. So many of the members of the Economic
Club of Detroit have been powerful engines each in your own way driving
Detroit's, and Michigan's, transformation from a 20th Century industrial
stalwart into an agile and creative 21st Century job creator. I admire
all that you did in the 1990s to embrace the new economy and take the reins
of this region's future. It wasn't easy-bold change never is-but it has
paid off, with hundreds of thousands of new jobs for Michigan residents.

I saw a lot of them during the 2000 campaign. I visited Visteon, an
automotive parts firm in Ypsilanti, which, as I'm sure you know, had spun
off from Ford earlier. The employees had been through a lot. They had felt
some serious growing pains. But the United Auto Workers and the management
worked together with an openness to change, and they have succeeded. One
employee said to me, "I've been here 28 years and I've seen a lot of changes."
I thought he was complaining. But then he said, "If we hadn't changed,
we wouldn't be working here today. These jobs would have left Michigan."

The same is true of the American economy. If, generation after generation,
our leaders hadn't come to the table with forward-looking economic strategies
and the capacity to adapt those strategies to the new realities, you and
I today wouldn't be a part of the most prosperous, innovative, and resilient
economy in the history of the world.

But that economy has some problems today. With government budget deficits
reappearing and the economic recovery coming only in fits and starts, with
Social Security's insolvency looming ahead and new homeland security and
defense obligations pressing in on us today-we're at a critical crossroads.

I want to talk with you about the steps I believe we must take to return
to the high-growth passing lane where we spent the 1990s. As I do, I want
to stress this isn't just about economic statistics. It's about creating
and protecting jobs for millions of Americans, expanding the middle class,
and sustaining the American Dream for all who want to give their children
opportunities they never had.

That's why I am so concerned that, although President Bush has been
in office for almost 16 months now, he has not yet presented a real economic
growth plan for our country. While the President has shown a willingness
to make tough choices in the war against terrorism, in the fight for America's
prosperity, the President's policies have been passive at best.

As a result, we're witnessing the appearance of a new troubling deficit:
an economic leadership deficit. The President needs to close that deficit
and open new possibilities for our people. He and we in Congress can best
do that by learning from what has worked in the past.

The 1990s: The Progress We Made

To make an economy grow, you need to know how business works. I'm the
son of a small-businessman who worked days and nights, balanced his books,
and taught his children to respect every dollar-so I've always appreciated
the fact that business, not government, creates economic growth and jobs.
Jobs and wealth are created because of private labor, private investment,
private productivity, and private innovation.

But government has an important part to play. It must create the conditions
for growth. When it does and the private sector responds, everyone wins.
That's exactly what happened during the Clinton Administration: good government
policy encouraged and unleashed the genius of American enterprise. And
don't let Enron's collapse fool you into thinking that the success of the
1990s was just balance sheet bloat. It was real. Businesses created more
than 22 million jobs. More than 7 million Americans moved off welfare.
Record numbers of families sent their kids to college, invested for retirement,
and bought homes.

Notwithstanding current cinematic suggestions, the economy of the 1990s
didn't get superpowers from a spider bite. Nor did it harness The Force.
The economy grew because, after years of mounting deficits that put a dark
cloud over our economy, President Clinton and the Democratic Congress had
the courage to change course. We got our government out of hock. We cut
taxes strategically to lubricate the engines of growth. We made smart investments
in education and other incubators of innovation. And we opened markets
around the world. In short, we, like any successful business, had a growth
strategy. We stuck to it. And it worked.

Helping to unleash all that investment capital took no small amount
of political capital. At many points, special interests cried foul. Every
Republican in Congress opposed the 1993 balanced budget plan. Many Democrats
opposed NAFTA, GATT and other free trade agreements. But, knowing that
sometimes the right choice is one that goes against the orthodoxies of
both parties, we stood by our blueprint of fiscal discipline, strategic
public investments, and open markets, and the American people reaped the
bounty of prosperity and progress.

Dostoevsky said, "Money is coined liberty." He was right. When we create
the conditions for our markets to thrive, we keep the American Dream alive.
The American Dream isn't a hollow political slogan or a crass caricature
of surpassing the Joneses. It's about individuals working hard to enter
the middle class, own a home, send their kids to college, or start a business.
It's the steady and satisfying march toward economic advancement, equal
opportunity, personal fulfillment, and family security.

Bush: Weakening the Pillars of Growth

If this Administration doesn't show some economic leadership soon, the
American Dream will be harder and harder for millions of Americans to realize.
I'm a naturally optimistic person, especially when it comes to the American
economy-and we've seen some encouraging flickers of economic activity recently.
But day after day, business leaders all across America still express their
pessimism to me about the future. They're not worried about a deeper recession.
They just don't have confidence in a strong recovery. Profits are generally
low. Unemployment remains high, and job growth is slow. In fact, we've
gone from creating 2 million private sector jobs a year in the 1990s to
losing nearly 2 million in the first 15 months of the Bush Administration
-including nearly 70,000 job losses thus far this year, during what was
supposedly an economic recovery.

We've gone from a $260 billion annual surplus in 2000 to a projected
$100 billion deficit this year. The 10-year federal surplus projections
have collapsed from $5.6 trillion last year to a little more than $1 trillion
now, and they are still falling. That means a loss of more than $4 trillion
and an extra $1 trillion required in interest payments on the debt we're
not retiring. Let me repeat that. The debt the federal government is not
retiring will cost taxpayers $1 trillion in interest payments alone over
the next 10 years-a trillion dollars that will bring us nothing: no stronger
defense or homeland security, no better schools or healthcare, no cleaner
water or air, no more guaranteed Social Security and Medicare.

That would be bad news at any time, but it is particularly bad now.
Beginning in 2017--only 15 years from now--and for the 24 years that follow,
we'll have more than $7 trillion in Social Security promises to keep-and
the payroll tax won't nearly cover them. In fact, in 2020 alone the tax
is projected to fall $125 billion short of what we need to pay Social Security
benefits. In 2030 that gap grows to $630 billion. By 2040, we start counting
in trillions.

The only way we'll ever be able to meet these solemn obligations to
American workers is for the government to have the strongest possible fiscal
position, with the least debt and the most growth. The Bush Administration's
slow-growth, high-debt policies just won't do it.

Sometimes it seems as if this Administration has been stricken with
economic amnesia. The record-breaking growth of the 1990s was built on
four powerful pillars: balanced budgets, pro-growth tax cuts, intelligent
investments, and open markets. President Bush has weakened each one of
those pillars. His economic plan could fit on the back of a shampoo bottle:
"Cut taxes, increase spending, borrow, repeat." If he keeps repeating that
plan, he will surely endanger Social Security benefits and slow our economy
to a halt, just when we need the most economic strength we can muster to
fight and win the war against terrorism.

Fixing the Hole: Returning to High-Intensity Growth

How, then, can we do better? The best way to produce prolonged prosperity
is by making tough choices and applying a coherent growth strategy.

First, we must get our federal budget back in balance and stop taking
money from the Social Security and Medicare trust funds. To do that, we
must be prepared to postpone the most expensive and least progressive parts
of the Bush tax cut that go into effect in 2004, 2006 and thereafter.

I voted against the tax cut last May for three reasons. I said it would
be ineffective, failing to spur economic growth or job creation; irresponsible,
spending projected surpluses that very well might not materialize; and
unfair, giving the biggest benefit to those who needed it the least. Instead,
I wanted to do something very close to what Al Gore and I campaigned on
in 2000-put a third of the projected surplus toward debt reduction, a third
toward strategic investments, and a third toward tax cuts. The tax cuts
I could have supported would have kept our budget in better balance; ignited
investment and innovation with real incentives for business growth; and
given the most help to those who needed it the most.

Without hesitation, that's the plan I would implement today. But President
Bush has made adamantly clear that he won't budge-so starting from scratch
is just not within the realm of possibility. Meanwhile, every single one
of the problems I had with the Bush tax cut last year has grown even bigger
now in light of our stagnant economy and the new investments we must make
in homeland security and national defense.

In that context, it's irresponsible for President Bush to call for another
$600 billion in tax cuts on top of the $1.7 trillion already enacted, and
to ask that all of last year's tax cut be made permanent. Because the tax
cut's most expensive provisions are back-loaded, in the first decade after
2012, making the whole tax cut permanent would cost us another $4 trillion-or
more than $7 trillion, when you add in the interest on the debt (according
to the Center on Budget and Policy Priorities).

Both suggestions are unacceptable, because they are self-destructive.
We can't just go on a big spending spree and then stiff our children with
the bill. That's just plain wrong.

The President and Congress have to closely monitor our economy and our
books. Unless we see stronger economic and budgetary projections next year,
it would be irresponsible to let the next big tax cuts-which are mostly
for the wealthiest in our country-go into effect in 2004. If in 2003 our
budgetary and economic outlook remains weak, we must appeal to the President
and our colleagues in Congress, both Republican and Democrats who voted
for the tax cut last year, to come together and do the responsible thing:
postpone at least three slow-growth and overly-expensive parts of the tax
cut that have yet to be implemented. Specifically:

* The reduction of the top rate from 38.6 percent to 35 percent
scheduled in 2004, and the further reduction of the next rate from 35 percent
to 33 percent scheduled in 2006, should both be put off;
* The full repeal of the estate tax should be replaced with a substantial
rate cut and exemption increase;
* The "PEP and Pease" personal exemption and itemized deduction provisions
should be postponed.

With the money saved-which would total approximately $1 trillion over 20
years-we should: 1) make pro-growth tax cuts including incentives for investment
and research and development and a broad tax deduction for the cost of
higher education; 2) reduce the growing deficit; and 3) pay for some of
the critical investments we need to make in education, defense, and homeland
security.

In my view, every tax cut we make should be sustainable. In other words,
it should be a cut that's effective enough and responsible enough to keep
for the long run. We're lucky that the portions of last year's tax cut
that have already been implemented are the least expensive and most defensible
parts. That's why I support not only keeping, but making permanent all
parts of last year's tax cut that have already gone into effect. These
include:

* The creation of the new 10 percent income tax bracket-which
benefits all taxpayers, and especially lower income Americans;
* The reduction in the 39.6, 36, 31, and 28 percent rates by one point
each;
* The cut in the estate tax rate, and the increase in the exemption.

If we were to postpone the three items I have just described, 98 percent
of all families-those who make less than $180,000 a year, and fall in the
15 percent, 28 percent and 31 percent tax brackets-would get every dollar
included in the tax rate cuts adopted last year. Not a single American
would be paying more in taxes than they are today. Even the top two percent
would get the tax cuts they've already received-which are substantial.
I know that some will say that this would be raising taxes, because they
prefer to play politics rather than grow our economy. But read my lips:
Keeping current tax rates is not a tax increase.

The choice is ours. Let's have the brains and the guts to make it if
that's what the numbers require next year.

That's step one. Our second step to restore strong economic growth should
be recommitting to free and fair trade.

I've supported China's entry into the World Trade Organization, the
creation of NAFTA, GATT, and countless other free and fair trade agreements
that opened markets around the world to American products and services-and
vice versa. Opening markets widens the winner's circle for everyone. That's
why I'm proud that in the Senate we are on the verge this week of finally
giving the President the fast track trade promotion authority that President
Clinton was denied five years ago.

But our work to open foreign markets is far from done. We must keep
moving in the same direction, selling our products in new markets around
the world because that will create and continue more jobs here at home,
but understanding that not all boats will be lifted by the rising tide
of exports. The answer to those workers who may be left behind is not to
raise the false hopes of fake walls, but to give them the financial support
and training assistance they need to prosper in this rapidly-changing global
marketplace-which is exactly why the Senate is right to pair TPA, Trade
Promotion Authority, with TAA, Trade Adjustment Assistance. We can and
must be pro-trade and pro-worker at the same time.

Third, we must limit spending and find savings to help us get the federal
budget into balance and make room for critical new investments in defense
and homeland security.

One of the great achievements of the 1990s was the slowing of federal
spending to half its rate of growth in the 1980s. Right now we're in danger
of losing our spending discipline, so I propose capping all non-defense
discretionary spending, perhaps at the rate of inflation.

I also support the proposal by my colleague John McCain to create a
commission to recommend cuts in corporate welfare-multi-billion dollar
payments that don't produce new economic opportunities.

Even when it comes to military spending, we have to be willing to make
the tough choices. For example, the Crusader artillery is a good system,
but Secretary of Defense Rumsfeld is right: given the changing nature of
war, the billions we would spend on it should be invested in more effective
future capabilities that take advantage of emerging technologies. I will
support Don Rumsfeld's decision to terminate the Crusader.

Fourth, we must make focused, high-return investments in job creation
and economic growth. The Bush Administration doesn't seem to understand
the new economy as well as you in Michigan have proven you do. In this
century, focused government investments in education, training, and innovation
will drive economic growth worth many times their initial expense.

As you know, the new economy's success rises or falls on the quality
of our schools, so we need to provide the resources enabling all our children
to acquire the skills they need to compete in era of globalization. But
the President has recommended $5 billion less for our public schools this
year than we, and he, promised in the reform bill he signed into law in
January. We must match that with a new effort to give more Americans access
to high-quality higher education. As long as young people from high income
families are seven times more likely to graduate college than young people
from low-income families, billions of dollars in economic potential-and
millions of human opportunities-will be lost.

We also need to make research investments and create smart tax incentives,
including targeted capital gains cuts, to sow the seeds of business innovation-not
to manufacture growth, but to spark it. We need a coherent, coordinated
national strategy for broadband Internet deployment, which has the potential
to deliver up to $500 billion in new annual economic growth to our economy.
We need to invest in medical research, which in addition to economic benefits
will save, prolong and improve lives. We also need to invest in R&D
and use tax incentives to leverage economic growth in breakthrough areas
like nanotechnology, which are already demonstrating the potential to remake
and remap a whole host of industries.

Conclusion

All these elements of a strong economic growth strategy will require
both leadership and bipartisanship to implement. Spenders will oppose every
cut, and ideologues will try to thwart every high-growth incentive.

But if we're serious about producing jobs-and securing the blessings
of prosperity for ourselves and our posterity-we have only one good choice.
We have to be disciplined. We have to work together. We have to be strategic.
We have to sow the seeds of enterprise, not squander them.

In 1962, President Kennedy-who helped lay the foundation for the economic
boom of the mid- to late- 1960s-said something that still rings true today.
"What is at stake in our economic decisions is not some grand warfare of
rival ideologies which will sweep the country with passion, but the practical
management of a modern economy. What we need is not labels and clichés
but more basic discussion of the sophisticated and technical questions
involved in keeping a great economic machinery moving ahead."

That is what I have tried to do today. That is the discussion our nation
needs. And those are the choices before us. If we make the right ones today,
then tomorrow our great economic machinery will be moving ahead, firing
on all pistons, into the 21st Century.